Tech sector X Factor: The customer isn't always right
Splunking from Twitter to Flickr
Open ... and Shut Curing cancer is probably worth a few billion dollars to whoever figures it out. But so is helping enterprises search machine data to find patterns and problems, as Splunk has learned in its 1999-style IPO last week.
Splunk, which now bills itself as "Google search for the data centre," originally intended to cure cancer. It's fair to say that its investors and customers are glad for the less noble purpose that now fuels its success.
Which, perhaps, is a reminder that while listening to customers can be the death of a successful company, as Clayton Christensen argues in The Innovator's Dilemma, it can also be the thing that makes your company successful. Not that there's any particular pattern to this "success" thing.
Charlie O'Donnell, a venture capitalist with Brooklyn Bridge Ventures, illustrates this well in a recent blog post:
Venture capital is kind of like a knuckleball. Even the guy tossing it around has no clue why it winds up where it does. VCs construct stories in their head as to why they invested in this or that, and much of it is based on prior experience, but they're often awful at articulating the real reasons. Maybe you reminded them unconsciously of an entrepreneur they regretted passing on in the past. Maybe they turned you down because they thought you were too pushy. So much of this is gut feel with a thin later of strategy retrofitted to seem more than random.
Which is not to say that there's no rhyme or reason as to why some companies succeed and some fail, but rather that there may be (very) few timeless truths to apply.
Splunk gave up on cancer to focus on an area that the founders knew well. Twitter's founders dumped a (then) hot market – podcasting – to create a wholly new product that did something no one knew they needed. Box decided to apply a consumer technology approach to enterprise content management, but it took years to catch hold (and "catch hold" it has, and then some). Groupon started out as a do-gooder website designed to let people donate en masse to a cause, and became a group-buying service (or a financial train wreck waiting to happen, depending on your perspective).
There aren't many commonalities between these different examples.
One thing that does seem to apply is that in each case, the companies focused on something that was of particular interest to at least one of the founders. That and a willingness to pivot which, as described in Startup Genome project data, is an essential characteristic of successful startups.
In fact, the more you dig into some of the industry's biggest, most successful companies, the more prevalent the willingness to pivot early on.
Instagram? It started off as a Foursquare clone (called "Burbn"). Users didn't love the check-in service, but did love the photo-sharing aspect. $1bn later...
Flickr? It started as a massively multiplayer online role-playing game called Game Neverending. Facing oblivion, the company launched a photo-sharing service as part of the game, which co-founder Caterina Fake later said the company never would have done had it reviewed the online photo-sharing market, given that there really was no market.
And so on, from Apple to PayPal to YouTube to Microsoft to Sony to Nokia to ... you get the picture.
About the only commonality between these companies was a willingness to make big changes when customers didn't fall all over themselves to buy the initial product. It's not even the case that each company was well-funded, allowing them to make the changes without worrying about cash flow. In several cases these were desperate measures taken to stave off oblivion…and they worked.
Of course, many other start ups have pivoted and landed with a thud. Lesson? There is no easy path to success, but a calculated pivot may well help. ®
Matt Asay is senior vice president of business development at Nodeable, offering systems management for managing and analysing cloud-based data. He was formerly SVP of biz dev at HTML5 start-up Strobe and chief operating officer of Ubuntu commercial operation Canonical. With more than a decade spent in open source, Asay served as Alfresco's general manager for the Americas and vice president of business development, and he helped put Novell on its open source track. Asay is an emeritus board member of the Open Source Initiative (OSI). His column, Open...and Shut, appears three times a week on The Register.
"Venture capital is kind of like a knuckleball"
A really valuable simile, given that I have a reasonable idea what venture capital is, and have never heard of a "knuckleball". Is it some kind of arthritic complaint?